House Speaker John Boehner indicated Tuesday that Republicans will vote on an extension of the federal debt ceiling to allow Treasury to borrow money until mid-May. ...

... the next moment of high political and market drama will occur when the so-called "sequester" or automatic across the board spending cuts, kicks in on March 1.

After the "sequester" comes the "continuing resolution" on March 27th. Note: Congress decided last September to extend spending authority for six months with a "continuing resolution".

I expect something will be worked out on the sequester, but there is a strong possibility the “continuing resolution" will lead to a government shutdown. A government shutdown would be disruptive, but probably not catastrophic since most of the government expenditures would continue.

• 8:45 AM, LPS will released their "First Look" report on December mortgage performance

• At 10:00 AM, FHFA House Price Index for November 2012. This was original a GSE only repeat sales, however there is also an expanded index that deserves more attention. The consensus is for a 0.7% increase in house prices.

• During the day: The AIA's Architecture Billings Index for December (a leading indicator for commercial real estate).